Product Price Optimization is a Low-risk Strategy for Sales Reps
We’re often surprised by how often distributors tell us that they are worried that product price optimization will result in pushback from their sales reps. Of course, there is a reason for this. Many distributors have outsourced their pricing strategy to pricing consultants with black-box methods who don’t understand their clients’ businesses, nor the value of their product or service. If that is your approach to price optimization, it’s no wonder you are worried about issues like sales rep pushback, training, and adoption. I wouldn’t trust the work of a pricing consulting company either.
With White Cup Pricing, sales rep objections are nonexistent because you make your price changes based on real customer data to determine the optimal price point for each product or service. This is put into effect with careful customer segmentation using your knowledge of your customers, products, and competition. Sales reps trust your pricing strategy because it’s based on real data. Most sales reps appreciate the corrected pricing strategies and guidance White Cup Pricing provides because they become more competitive and achieve higher top-line sales. In fact, we recently rolled out optimized pricing strategies and customer segments in one of our larger customers–a $2B durable goods distributor–and not a single sales rep in that enormous company had even a small complaint.
Why Your Customers Really Buy From You (Hint: It’s Not Price Alone)
Research on customer behavior shows very few of your clients buy on price alone. In fact, in an extensive study involving over 40,000 survey respondents, Stax Insights found that only 18% of buyers considered optimal price the most important factor in their decision. Is price important? Yes. Your pricing process has to be “right.” With the proper customer data analysis, you can offer the right price for the right product to the right customer at the right time. Does your price need to be the absolute lowest in the market or lower than competitors’ prices to win a deal? Not really.
Here’s the secret that industry-leading distributors are trying to keep to themselves. The best pricing strategy is not offering the lowest prices; it’s driving profitability and customer loyalty.
Customer Data for Optimal Price Points
Here are just a few of the real reasons customers buy from you, which is what allows you to raise prices and achieve the optimal price point in strategic segments:
- Speed. Turnaround time is very important to buyers. You may have better in-stock inventory and a fully staffed warehouse for timely logistics. Your shipping is fast and convenient, delivery of your product or service is on time, and perhaps you are a preferred vendor, so there is less red tape for the buyer to work with you.
- Support. You understand your customers’ customers and educate them on your product or service and process. That helps them win business with solid support and better customer satisfaction.
- Technology. You have built efficiencies around ordering, eCommerce, mobile, field sales enablement, VMI, EDI, etc. Your technological advantage based on customer and market data makes it easier for your customers to process orders with you and for you to make more informed decisions based on customer behavior.
- Convenience. For some contractors, nothing beats being in the neighborhood on their way to their next job. They’re going to pass the invoice onto their customer anyway. What is more important to them is getting to their next job quickly with the parts and equipment they need.
- Relationships. It’s nice to do business with you. Your sales reps are friendly, your golf tournaments are fun, and you are happy to make customer visits when necessary. Customer loyalty among existing customers is high and earning the trust of new customers helps to maximize sales.
- Product mix. If a customer is committed to a particular product line, you won’t win them over with lower prices on unbranded products. Your product or service is consistent, and you use market data for each customer segment to know how much customers respond to each offering.
What Do I Do With The 18%?
Of course, that still leaves 18% of your customers who count price points as their top concern when buying. They won’t be addressed by pricing strategies alone. What do you do when you can’t meet this customer demand? You could fire them and send them to a competitor, especially if they are a profit drain. If you’re losing money on a particular customer, why do it in volume?
However, with White Cup Pricing, we prefer not to make guesses about profitability. Our price optimization software helps you easily create sophisticated customer segments based on actual sales data. It’s possible that some of the 18% are power buyers. Their volume is profitable and worthwhile to your business. Another segment might need particular sales action to make them more profitable and introduce them to your value-added services. Some might just be cherry-picking you for the lowest prices because they don’t understand the depth of your entire product line. But by getting the 18% into the right behavioral segments, you’ll understand the right strategies and actions to improve their profitability and offer value based pricing to maximize revenue and refine your pricing strategy.
Where the Rubber Meets the Road
Our experience with distributors is that when your segmentation and pricing are based on real data, your sales reps trust your pricing and appreciate the guidance on each sale. Sales reps then become more confident in the reality of your price levels, so they panic less in their negotiations, and they trust your price matrix. When you have a sound pricing strategy in the first place, you reduce the amount of pricing overrides from sales reps.
Additionally, White Cup Pricing users enjoy price optimization tools like our Sales Assistant, which provides front-line pricing guidance right from your order entry screen or CRM. Your sales reps can immediately pull up a graphical, bell-curve representation of the statistically optimized price ranges and price changes for every customer and product intersection in your matrix. That means when they do enter a unique price negotiation, they’ll have the best tools to successfully and profitably bring the sale to a close.
Price Optimization Software That Helps You Win More
White Cup Pricing offers price optimization tools designed to help sales reps maximize revenue by determining competitive pricing that meets customer demand. Set the best price every time and navigate price changes based on real data and key pricing variables designed for distributors.
Get a demo of White Cup pricing to manage prices, win more deals today, and win more market share tomorrow.
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